By Carlos Malamud*
Chilean President Michelle Bachelet with the leaders of her coalition, Nueva Mayoría. The Chilean presidential election of 2017 will determine the legacy of the Nueva Mayoría. / Gobierno de Chile / Flickr / Creative Commons
The new year will be an intense one for Latin American elections. Although perhaps not as important as those taking place in 2018, this year’s elections will have a significant impact on the countries holding them and, in some cases, the region as a whole.
- In Ecuador’s presidential and legislative elections on February 19, the PAIS Alliance will run a slate of nominees for the first time without Rafael Correa heading its slate. The President said he’s stepping down for family reasons, but Ecuador’s economic problems, aggravated by the decline in oil prices, apparently convinced him to seal his legacy on a high note now rather than end his time in office in defeat. The party’s presidential candidate, former Vice President Lenin Moreno, has a 10-point lead in polls over his closest competitor and has the advantage of facing an opposition divided among seven candidates, but his leadership remains uncertain.
- In Mexico, the state governors of México, Nayarit, and Coahuila and mayor of Veracruz are up for election on June 4. The race in México state will measure the popular backing of the four parties in contention – PRI, PAN, PRD, and López Obrador’s new Movimiento Regeneración Nacional (Morena) – in the 2018 presidential election. The older parties will begin to weed out the weaker pre-candidates.
- Elections for half of the Argentine Congress and a third of its Senate in October will define the second half of President Mauricio Macri’s presidency. The government is confident that economic recovery will strengthen its election prospects. A weak showing will strengthen the Peronista opposition and complicate Macri’s agenda. The Peronistas are currently divided into three big factions – that of Sergio Massa; the “orthodox” wing headed by some provincial governors, and corruption-plagued Kircherismo grouping headed by former President Cristina Fernández. Open, simultaneous, and obligatory primaries (known by the Spanish acronym PASO) in August will be an important test for all.
- Chile will elect a successor to President Michelle Bachelet on November 19. Primaries in July will reveal whether the country’s two big coalitions – the center-left (including the President’s Nueva Mayoría) and the center-right – are holding, as well as the presidential candidates’ identity. The names of former Presidents Sebastián Piñera and Ricardo Lagos are in the air, but it’s too early to know how things will play out in the environment of growing popular disaffection with politics and politicians.
- Honduras will hold elections on November 26. Due to a Supreme Court decision permitting reelection, incumbent President Juan Orlando Hernández could face a challenge from ex-President Manuel “Mel” Zelaya, who was removed from office by the Army in June 2009, running as head of the Libertad y Refundación (Libre) Party.
- Also in November, Bolivia will elect members of various high courts, including the Constitutional, Supreme, and Agro-Environmental Tribunals and the Magistracy Council. These elections will reveal the support President Evo Morales will have as he tries to reform the Constitution to allow himself to run for yet another term in office.
These elections in 2017 have a heavy national component but will shed light on the region’s future direction. The success or failure of the populist projects in Ecuador and Honduras, or of President Bachelet’s Nueva Mayoría in Chile, will tell us where we are and, above all, help us discern where we’re headed.
January 17, 2017
*Carlos Malamud is Senior Analyst for Latin America at the Elcano Royal Institute, and Professor of Latin American History at the Universidad Nacional de Educación a Distancia (UNED), Madrid. This article was originally published in Infolatam.
Posted by clalsstaff on January 17, 2017
By Eric Hershberg and Fulton Armstrong
Brazilian President Michel Temer surrounded by members of his party in mid-2016. His government will continue to face questions of legitimacy in 2017. / Valter Campanato / Agência Brasil / Wikimedia / Creative Commons
The year 2016 laid down a series of challenges for Latin America in the new year – not the least of which will be adapting to a radically different administration in Washington. Last year saw some important achievements, including an elusive peace agreement in Colombia ending the region’s oldest insurgency. Several countries shifted politically, eroding the “pink tide” that affected much of the region over the past decade or so, but the durability and legitimacy of the ensuing administrations will hinge on their capacity to achieve policy successes that improve the well-being of the citizenry. The legitimacy of Brazil’s change of government remains highly contested. Except in Venezuela, where President Maduro clung to power by an ever-fraying thread, the left-leaning ALBA countries remained largely stable, but the hollowing out of democratic institutions in those settings is a cause for legitimate concern. Across Latin America and the Caribbean, internal challenges, uncertainties in the world economy, and potentially large shifts in U.S. policy make straight-line predictions for 2017 risky.
- Latin America’s two largest countries are in a tailspin. The full impact of Brazil’s political and economic crises has yet to be fully felt in and outside the country. President Dilma’s impeachment and continuing revelations of corruption among the new ruling party and its allies have left the continent’s biggest country badly damaged, with profound implications that extend well beyond its borders. Mexican President Peña Nieto saw his authority steadily diminish throughout the course of the past year, unable to deal with (and by some accounts complicit in) the most fundamental issues of violence, such as the disappearance of 43 students in 2014. The reform agenda he promised has fizzled, and looking ahead he faces a long period as a lame duck – elections are not scheduled until mid-2018.
- The “Northern Triangle” of Central America lurches from crisis to crisis. As violence and crime tears his country apart, Honduran President Hernández has devoted his energies to legalizing his efforts to gain a second term as president. Guatemala’s successful experiment channeling international expertise into strengthening its judicial system’s ability to investigate and prosecute corrupt officials is threatened by a weakening of political resolve to make it work, as elites push back while civil society has lost the momentum that enabled it to bring down the government of President Pérez Molina in 2015. El Salvador, which has witnessed modest strides forward in dealing with its profound corruption problems, remains wracked with violence, plagued by economic stagnation, and bereft of decisive leadership.
- Venezuela stands alone in the depth of its regime-threatening crisis, from which the path back to stability and prosperity is neither apparent nor likely. The election of right-leaning governments in Argentina (in late 2015) and Peru (in mid-2016) – with Presidents Macri and Kuczynski – has given rise to expectations of reforms and prosperity, but it’s unclear whether their policies will deliver the sort of change people sought. Bolivian President Morales, Ecuadoran President Correa, and Nicaraguan President Ortega have satisfied some important popular needs, but they have arrayed the levers of power to thwart opposition challenges and weakened democratic institutional mechanisms.
- As Cuban President Raúl Castro begins his final year in office next month, the credibility of his government and his successors – who still remain largely in the shadows – will depend in part on whether the party’s hesitant, partial economic reforms manage to overcome persistent stagnation and dissuade the country’s most promising professionals from leaving the island. Haiti’s President-elect Jovenel Moise will take office on February 7 after winning a convincing 55 percent of the vote, but there’s no indication he will be any different from his ineffective predecessors.
However voluble the region’s internal challenges – and how uncertain external demand for Latin American commodities and the interest rates applied to Latin American debt – the policies of incoming U.S. President Donald Trump introduce the greatest unknown variables into any scenarios for 2017. In the last couple years, President Obama began fulfilling his promise at the 2009 Summit of the Americas in Trinidad and Tobago to “be there as a friend and partner” and seek “engagement … that is based on mutual respect and equality.” His opening to Cuba was an eloquent expression of the U.S. disposition to update its policies toward the whole region, even while it was not always reflected in its approach to political dynamics in specific Latin American countries.
Trump’s rhetoric, in contrast, has already undermined efforts to rebuild the image of the United States and convince Latin Americans of the sincerity of Washington’s desire for partnership. His rejection of the Trans-Pacific Partnership – more categorical than losing candidate Hillary Clinton’s cautious words of skepticism about the accord – has already closed one possible path toward deepened ties with some of the region’s leading, market-oriented economies. His threat to deport millions of undocumented migrants back to Mexico and Central America, where there is undoubtedly no capacity to handle a large number of returnees, has struck fear in the hearts of vulnerable communities and governments. The region has survived previous periods of U.S. neglect and aggression in the past, and its strengthened ties with Asia and Europe will help cushion any impacts of shifts in U.S. engagement. But the now-threatened vision of cooperation has arguably helped drive change of benefit to all. Insofar as Washington changes gears and Latin Americans throw up their hands in dismay, the region will be thrust into the dilemma of trying to adjust yet again or to set off on its own course as ALBA and others have long espoused.
January 4, 2017
Posted by clalsstaff on January 4, 2017
By Miguel Centellas*
Photo Credit: Organo Electoral Plurinacional de Bolivia and Alain Bachellier, respectively / Wikimedia and Flickr / Creative Commons
Bolivian voters’ rejection last week of a constitutional amendment to allow an incumbent president to run for a third consecutive term is a setback for President Evo Morales but a step forward for the country. Both the government and opposition understood the national referendum as a plebiscite on Morales, who is now the longest serving head of state in Bolivian history. Had the referendum passed, Morales would have been able to run for a fourth five-year term in 2019. (Because Morales was first elected in 2005, before the new constitution was approved in 2009, the high court decided that he was eligible to run for reelection in 2014.) During the months leading up to the referendum vote, polls showed a narrow gap between the Sí votes in favor of the amendment and the No votes, with a large number of undecided.
As the final count began to crystalize (the official count is not yet available), it became clear that No won by a slim margin (51.3% to 48.7%). At first, Morales and members of his government disputed the results, arguing that late-arriving rural ballots would vindicate him. Later, they claimed opposition fraud and manipulation, including a “dirty” war waged by the opponents and the media. Several scandals, however, appear to have been the real cause of Morales’s loss.
- New developments in lingering accusations of fraud committed at the Fondo Indígena, an organization established to support economic, social, and political development of marginalized peoples. Government auditors last year uncovered more than a hundred incomplete or non-existent projects valued at tens of millions of dollars. The case involved several ex-ministers in Morales’s government and leaders of his MAS party.
- New allegations of corruption involving Gabriela Zapata Montaño, a romantic liaison of the President in 2006 who is now an executive for a Chinese-owned company (CAMC) that was awarded a large number of no-bid contracts for government development projects. Some sources claim millions of dollars have been misappropriated. Zapata was arrested shortly after the vote.
- Accusations that the MAS (and, implicitly, Morales) instigated angry protesters to attack the municipal building in El Alto, Bolivia’s second largest city, killing seven people and injuring many others. The mayor, Soledad Chapetón, and La Paz provincial governor Felix Patzi, a former education minister under Morales, were the first two opposition candidates to win those positions since MAS came to power. The government dismissed the allegations and suggested that Chapetón orchestrated the violence to make herself a martyr.
The results of the referendum – and, more importantly, the frenzied reactions from Morales and other high-ranking members of his government – make the immediate future appear uncertain. Morales accepted the results of the referendum but also ominously pointed out that there are other ways to amend the constitution. He also dared opponents to initiate a recall referendum to remove him. Nevertheless, some members of MAS – showing eagerness to carry the party’s wide support among Bolivians into the future – have begun publicly discussing possible successors. Another positive sign is that Bolivia’s electoral court showed itself to be truly autonomous, bolstering opposition confidence in a key institution. The question is whether Morales believes his party (and by extension his legacy) is worth preserving, or whether he wants to risk them for another dubious bid for reelection. Claims that Morales’s setback is part of a “conservative tide” sweeping through Latin America may be premature, but this referendum may have repercussions elsewhere. Ecuador’s Rafael Correa’s public comments that he would not seek reelection in 2017 may now become firmer. The day of the three- or four-term president seems over.
March 3, 2016
* Miguel Centellas teaches political sociology at the Croft Institute for International Studies at the University of Mississippi.
Posted by clalsstaff on March 3, 2016
By Ricardo Barrientos*
Photo Credit: Publinews Guatemala / YouTube / Creative Commons
The high hopes created by Guatemala’s peaceful, democratic change of government last year are hitting the shoals of reality. Guatemalans managed a major political crisis in 2015 in an exemplary way: massive citizen demonstrations against authorities accused of corruption lasted four months without a single incident of violence. Acceptably free and fair elections took place just three days after disgraced President Pérez Molina resigned, and a transition government was formed as mandated by the Constitution to govern until Jimmy Morales, the new Guatemalan President, was sworn in on January 14. Although lacking experience, a cabinet, and a plan, Morales inspired confidence with a very good slogan (that he was “neither corrupt, nor a thief”) and good communication skills honed as a former TV comedian. Voters had rejected and punished the “old politics” and felt hope that honesty would prevail.
Since Morales took office, however, serious mistakes have caused confidence to dim.
- His reluctance or inability to answer questions from journalists and to refrain from underestimating audiences by telling silly jokes and childhood stories are raising concerns among observers of an emerging authoritarian personality.
- Secrecy surrounding his cabinet selection process has led to missteps. His Minister of Communications, Infrastructure, and Housing was forced to resign after just 11 days in office – in the face of evidence of tax fraud and a serious conflict of interest.
- His first approach to Congress was only to reverse the position on 2016 public debt cuts that his representatives advocated last November. Asking Congress to reduce debt proved popular back then, but now transfers to the Public Prosecutor Office or to the public university can be made only if the original debt amount is restored by Congress. That condition is not only unpopular; it risks hampering the effort to prosecute corruption.
- Instead of asking Congress for an urgently needed budget increase to solve ongoing shortages of medicines and equipment in public hospitals and clinics – almost a humanitarian tragedy, he accepted pharmaceutical company donations of expired medications – in a deal redolent of past corruption.
- Morales’s political party, Frente de Convergencia Nacional (FCN), has grown substantially in Congress by receiving “turncoat” congressmen, directly contradicting an important campaign promise. “Turncoating,” jumping from party to party in Congress (always for a “price”), is one of the practices condemned in 2015 as part of the “old politics” and was strongly rejected by voters who trusted Morales. The Public Prosecutor Office has received complaints denouncing bribes, government jobs, and contracts offered to “turncoats” now affiliating with the FCN.
Events in Guatemala over the past year present a huge contrast with what the country was a couple of decades ago – triumph for a society deeply marked by civil war, poverty, and brutal inequality, with the fresh hope of a new democratic spring. Jimmy Morales appears to be squandering a historic opportunity to harness this democratic momentum. Voters who set aside concerns about his links to right-wing Army veterans accused of crimes against humanity during the civil war could soon feel deceived because the “old politics” is still in place. Guatemala’s democratic spring may fade before it blooms, sowing the seeds of crisis and instability in the future.
February 22, 2016
*Ricardo Barrientos is a senior economist at the Central American Institute for Fiscal Studies (Icefi).
Posted by clalsstaff on February 22, 2016
By Thomas Andrew O’Keefe*
Participating countries in MERCOSUR. Image Credit: Immanuel Giel (modified) / Wikimedia / Creative Commons
Pundits who dismiss MERCOSUR and the Union of South American Nations (UNASUR) as failed attempts at Latin American economic integration should look again. MERCOSUR has presided over an explosion in intra-regional trade among its four original member states (Argentina, Brazil, Paraguay, and Uruguay) from just over US$ 5 billion at its launch in 1991 to US$ 43 billion by 2014. UNASUR, for its part, is credited with thwarting a coup attempt against Evo Morales in 2008 and putting a damper on continental arms races.
- MERCOSUR and UNASUR member countries have taken additional important steps toward convergence since 2014, when MERCOSUR’s highest governing body adopted “CMC Decision 32,” which allows initiatives pursued by either collective to be binding on both if they arise from a set of goals and objectives common to both. The document reaffirms the UNASUR founding treaty stipulation that “South American integration shall be achieved through an innovative process that includes all of the achievements and advances by the processes of MERCOSUR and CAN [Andean Community].” Chile has spearheaded this effort as a means of reducing duplication of efforts, and is also attempting to bridge ideological differences between the Pacific Alliance (Chile, Colombia, Mexico, and Peru) and MERCOSUR to further build Latin American unity.
Given the relentless negative assessment of both integration projects, multinational pharmaceutical companies were caught off guard when MERCOSUR and UNASUR forced them late last year to make substantial price cuts for public-sector purchases of Darunavir, an antiretroviral to combat HIV-AIDS, as well as Sofosbuvir, used with other medications to treat Hepatitis C. Both drugs are on the World Health Organization’s List of Essential Medicines. As a result of CMC Decision 32/14, the Ministers of Health of all the South American nations met in Montevideo on September 11, 2015, and launched a joint MERCOSUR/UNASUR committee to negotiate with multinational pharmaceutical companies on the prices for bulk purchases of certain high-priced drugs. The committee, made up of representatives from each government’s agency responsible for purchasing medicines, won major price cuts last November – a steep reduction for Darunavir from Hetero Labs as well as lower prices with Gilead for Sofosbuvir. The new costs were premised on the lowest amount charged to any one of the member governments, and enabled Chile’s Ministry of Health to pay 90 percent less than what it previously paid for Darunavir. The South American governments as a whole are expected to save US$ 20 million in 2016 on purchases of this anti-retroviral. A proposed 14 percent reduction in the cost of the combination Sofosbuvir-Ledispaver drug for Hepatitis C – if accepted by the MERCOSUR/UNASUR committee – would enable further savings.
The South American governments have their eyes set on several additional high-priced medications, with a particular focus on drugs used to treat cancer. In order to aid the committee’s work, UNASUR is creating a data bank of the prices charged by the multinationals for specified medicines purchased by the public health sector in each member state. The fact that the purchases are made jointly through the Pan American Health Organization’s already existing Strategic Fund opens the possibility that countries in Central America and the Caribbean can benefit as well. It also means that all these countries can access the Fund’s capital account and do not need to have the cash in hand to acquire medications required to address public health emergencies. MERCOSUR and UNASUR – often dismissed as ineffective – are demonstrating that integration produces tangible results.
February 11, 2016
* Thomas Andrew O’Keefe is President of San Francisco-based Mercosur Consulting Group, Ltd. and is former chair of Western Hemisphere Area Studies at the U.S. State Department’s Foreign Service Institute (2011-15).
Correction: Due to an editing error, an earlier version of this post mistakenly stated that “a 14 percent reduction in the cost of its combination Sofosbuvir-Ledispaver drug for Hepatitis C will enable Chile’s Ministry of Health to pay 90 percent less than what it previously paid for Darunavir.” The outcomes of the cost negotiations for the two medications are unconnected.
Posted by clalsstaff on February 11, 2016
By Santiago Anria*
Photo Credit: zak / Flickr / Creative Commons
A Bolivian referendum on February 21 – one month after the 10th anniversary of President Morales’s rise to power – threatens a break with the country’s tradition and the democratic principle of power alternation. A “Yes” vote on the constitutional amendment up for approval would allow Morales and Vice President García Linera to run in 2019 for a fourth consecutive term – a scenario that the fragmented opposition claims would mean not only greater concentration of power in a personalistic leader but also a shift toward authoritarianism, similar to that in Venezuela. The government claims that a “No” vote would mean the end of an era of unprecedented economic and democratic stability, the end of measures that have empowered subordinate groups in society, and the return of the right and neoliberalism. Opinion polls so far show the vote will be close.
Morales’s efforts to extend his time in office are consistent with his tendencies to dominate politics and the policy process. Yet my research shows that increased political incorporation during his government has also given previously marginalized groups enhanced influence over agenda-setting and policy-making and led to important shifts in domestic power relations. In today’s Bolivia, well-organized interest groups typically belonging to the “informal” labor sector (such as coca growers, cooperative miners, and transportation unions) have greater influence over policy from within the state (in representative institutions and state bureaucracies at all levels) and from without (direct pressure in the streets). This has resulted in greater regime responsiveness to the groups’ interests and in policies that expand economic and social benefits, as well as improvements in poverty and inequality reduction – even without meeting some of their fundamental needs such as employment and health care reform. While in some instances newly empowered groups have mobilized and served as a check on state power, their role is founded on a highly particularistic relationship of the MAS and allied groups and, as such, can actually be an obstacle for governing in the interest of broader segments of society.
An intense government campaign in favor of the constitutional amendment is already under way and will likely deepen in the coming weeks. The Morales government lacks the kind of epic framing it had when it first won the presidential election in 2005. Citizens today express concerns similar to those voiced during previous governments – concentration of power, widespread corruption, inefficient institutions, weak protection of liberal rights, politicization of courts, and hostility to opponents and the press. A “Yes” victory on February 21 would not automatically mean a shift to an authoritarian regime as core features of authoritarianism (i.e., power exercised by a small group overriding the will of the citizens) are not currently evident. In addition, Morales’s tendencies to dominate often meet strong checks from a relatively autonomous civil society. Comparative evidence suggests, however, that a fourth Morales term might lead to further power concentration and decreased political input from below — which could mean a weakening of the MAS as an organizational actor for the empowerment of subordinate groups independent of its undisputed leader. A “No” victory, on the other hand, would not necessarily mean the end of the social and political transformations carried out by the MAS. If nothing else, Bolivia’s “process of change” over the past decade has given rise to a “new normal” of more inclusive institutions and basic social programs that benefit large sectors of the population and will be difficult for any future government to reverse.
January 19, 2016
* Santiago Anria is a postdoctoral fellow at Tulane University’s Center for Inter-American Policy and Research.
Posted by clalsstaff on January 19, 2016
By Robert Albro
Previous elections in La Paz. Photo credit: Pablo Andres Rivero / Flicker / CC BY-NC-ND
Departmental and municipal elections in Bolivia last week dealt a significant setback to President Evo Morales’s party, the Movement Toward Socialism (MAS). Benefiting from strong economic growth, broad-based support from among the country’s many social movements, and the absence of major controversy, last October Morales was elected to a third term as Bolivia’s president with an impressive 61 percent of the vote. He is on track to be in office until 2020, making him the longest-serving leader in Bolivian history. Last week, however, the party won just four of nine races for departmental governor and two of the races for mayor in Bolivia’s ten largest cities, reversing a trend of sustained MAS dominance since Evo’s election in 2006. Most alarming for the MAS is that it lost across the board in the previous strongholds of La Paz and El Alto. This unexpected outcome has touched off speculation that the MAS is running out of steam.
The MAS emerged as a national political force during the sustained social ferment of the early 2000s. It reaped the benefits of widespread popular disenchantment with government as a movement for change and indigenous enfranchisement, and it built a successful coalition across ethnic, class, rural-urban, and to some extent, regional differences. The MAS’s rise coincided with the collapse of the country’s established political parties. As the only remaining national political movement, the MAS has since often identified its approach to governance as a bottom up, participatory, or popular plebiscite – a multiethnic and plurinational vision of local autonomy that it has successfully enshrined in the country’s constitution. Addressing last week’s upset, Vice President Alvaro García Linera noted the MAS had done a poor job of cultivating new local leaders. Evo suggested it was a “punishment vote” in response to recent corruption scandals involving MAS candidates. Nor did Morales do his candidates any favors when he threatened not to work with opposition politicians in El Alto or La Paz if they were elected.
Despite this setback for the MAS, local opposition at the polls does not necessarily lead to national opposition. The political opposition remains fragmented, and the MAS remains the country’s only truly national political party. Even where it lost races for governor or mayor, in most cases the MAS enjoys a majority in the state legislatures or city councils. However, several factors – corruption scandals, continued dependence on the extractive industries, and the party’s habit of co-opting right-wing non-masistas as candidates where it thinks they will win – point to the stubborn persistence of different national and local political realities. When the MAS has run into problems in recent years, as with recent controversy over a plan to build a highway through the TIPNIS indigenous territory and national park, it is because it misread local political terrain, chose poor candidates, and ran afoul of regional or local autonomies. The horizontal and plural coalition-building that has been the MAS’s hallmark can be a clunky local political instrument. Last week highlighted that local electorates are less driven by social movement ferment, ideology, or historical change; are notably distrustful of MAS impositions from above; and are more interested in prosaic matters of good governance and candidates they know and trust. It was certainly not the beginning of the end of the MAS. But if the national party continues to struggle in the face of diverse local political realities, it could signal for the MAS a gradual death by a thousand cuts.
April 9, 2015
Posted by clalsstaff on April 9, 2015
By Paul A. Haslam*
María del Carmen Ortiz / Flickr / Creative Commons Attribution-NonCommercial-ShareAlike 2.0 Generic (CC BY-NC-SA 2.0)
Resource nationalism is driving the most significant shift in Latin American development policies of the past decade. It is rarely talked about yet is constituting a new developmental model that is being adopted by governments of diverse ideological inclinations. It has involved reforming taxation regimes dating from the 1990s to extract more “rent” from natural-resource intensive industries; strengthening and extending state capacity; using rents to support social spending by the state, including anti-poverty programs; and – most importantly – linking resource abundance with industrial policy. It is the basic framework of the post-neoliberal development model, and examples are many. The splashier headlines in the past decade focus on various instances of nationalization, including the expropriation of YPF in Argentina (2012); Venezuela’s erratic nationalization program; and Bolivia’s dramatic military occupation of foreign-owned gas facilities in 2006 – all intended to achieve these goals. Early this month, the provincial government of San Luis, Argentina, presented a project-law to create a new provincially owned mining company, San Luis Minera (SAPEM) – joining many fellow provinces that have created or breathed new life into state-owned enterprises (SOEs), particularly in the mining sector.
By and large, these enterprises exist to associate with multinationals, following the trail blazed by Argentina’s YMAD (in Catamarca) and Fomicruz (in Santa Cruz) during the dawn of Argentina’s mining boom in the late 1990s. The SOEs typically offer the rights to prime potential lands claimed by the state, handle the administrative and regulatory requirements of the province, and in some cases, negotiate the social licence with nearby communities. In exchange, they get a small net profits interest (typically around 8-10 percent), which results in rent for the province. The multinational does everything else: raises the money; plans, builds and operates the mine, and sells the mineral.
These are not the rent-seeking policies typical of low-capacity governments. The enduring principles of the liberal regime (such as low royalty rates) have pushed revenue-hungry governments to explore creative options such as these to capture rent from their mining sectors. The new SOEs are also an institutional innovation that aims at leveraging natural resource wealth for economic development, as governments also expand resource-funded social spending. One of the objectives of Morales’s “nationalization” of Bolivia’s oil and gas resources, for example, was to “revitalize” the state-owned YPFB (Yacimientos Petrolíferos Fiscales Bolivianos) as an engine of development. Nor is this “resource nationalism” exclusively a project of the left: Chile increased royalty rates in a “Special Tax” on the mining sector in 2005, and Colombia and Peru have hiked taxation on mining as well. Brazil has continued to use of SOEs like PETROBRAS. It’s still an open question, however, how successfully the rents generated by this new model can be combined with industrialization or development strategies that deliver enduring benefits.
*Dr. Haslam teaches at the School of International Development and Global Studies, University of Ottawa, Canada.
Posted by clalsstaff on August 19, 2014